The Nordic Model - Embracing globalization and sharing risks

als take part in various unemployment insurance and activation
schemes.
The main policy conclusions that emerge from the research
literature are 12 :
· A generous unemployment insurance scheme is not infeasible
per se; unemployment spells need not imply poverty.
· However, there is a strong case for a decreasing time profile
in benefit payments as well as an expiry date for their
duration. In other words, insurance levels can initially be
high, but they must shrink markedly as the unemployment
spell is prolonged. A large amount of theoretical and empirical
research suggests that the search effort of the
individual intensifies as the time limit approaches and the
benefit level shrinks. A fairly high initial benefit level can
be compatible with efficiency, but it must also be preceded
by a “self-insured” no-benefit period at the very beginning
of an unemployment spell, so that transitions to unemployment
in general and abuse of the insurance system in
particular is discouraged.
· There is a strong case for active monitoring of the recipient’s
search effort. Monitoring is costly, but stringent
monitoring can sustain a more generous insurance system.
Needless to say, the cost of monitoring can be kept down
if the sanctions of getting caught are sufficiently severe.
· Similarly, the effects of workfare elements, in the sense of
conditionality of benefits on training or activation schemes,
can also be strong. Even if the productivity and direct
return on activation schemes is poor, such schemes can
act as a useful deterrent and selection device – an activation
scheme or a training course makes unemployment
a less attractive option for those not strongly engaged in
job search.
With structural unemployment stuck at 6–7 per cent in Sweden
and Finland, one clearly has to ask whether the unemployment
insurance system is appropriate at present.
The introduction of uniform pay increases in Sweden in the
1950s went hand in hand with an active labour market policy in-
Unemployment benefits
can be generous
if they are time limited
and conditional – a
review of the rules is
called for
114 · The Nordic Model